Comovement and instability in cryptocurrency markets

【Author】 De Pace, Pierangelo; Rao, Jayant

【Source】INTERNATIONAL REVIEW OF ECONOMICS & FINANCE

【影响因子】3.399

【Abstract】We analyze the extent of comovement between daily price returns of nine major cryptocurren-cies from April 2013 to February 2021. We assess its evolution using bivariate and multivariate modeling approaches, and detect pronounced time variation. Generally, comovement is initially low and positive, but increases substantially between early 2017 and late 2018 and stays high until the end of the sample. We then adopt a right-tail version of the Augmented Dickey-Fuller unit root test to identify periods of mildly explosive behavior (statistical instability) in the Network Value to Transactions (NVT) ratio of seven cryptocurrencies. The NVT ratio is a novel measure of the dollar value of cryptocurrency transaction activity relative to network value. We show evidence of significant mild explosiveness in all seven cryptocurrencies. In 2018 and in the second half of 2019, several cryptocurrencies experience often simultaneous instability. Instability is a dominant feature of these markets.

【Keywords】Mild explosiveness; NVT ratio; Comovement; Asset pricing; Cryptocurrencies

【发表时间】2023 JAN

【收录时间】2022-09-28

【文献类型】实证数据

【主题类别】

区块链治理-市场治理-市场分析